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Productivity slowdown and misallocation in the post-recession: What prevents recovery?

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  • Umut Kılınç

    (Institut national de la statistique et des études économiques du Grand-Duché du Luxembourg (STATEC))

Abstract

This study explores the effects of the 2008 global economic crisis on the labor allocation and productivity in Luxembourg. The analysis is based on firm-level data from manufacturing and non-financial service sectors and finds a dramatic productivity slowdown after 2008. The study reveals that the cleansing effect of recession did not function effectively which would otherwise improve the efficiency in the labor allocation and counterbalance the productivity slowdown. The firm entry and job creation rates are lower in the post-crisis period, but the job destruction is not significantly altered by the crisis. The findings call attention for the strict employment protection legislation that possibly plays a role in preventing reallocation towards more efficient establishments. Relaxing the employment protection legislation simultaneously with facilitating the entry and growth of young firms is expected to promote creative destruction, improve allocative efficiency and speed up the post-crisis recovery.

Suggested Citation

  • Umut Kılınç, 2018. "Productivity slowdown and misallocation in the post-recession: What prevents recovery?," The Journal of Technology Transfer, Springer, vol. 43(6), pages 1542-1570, December.
    • Handle: RePEc:kap:jtecht:v:43:y:2018:i:6:d:10.1007_s10961-016-9541-0
    DOI: 10.1007/s10961-016-9541-0
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    More about this item

    Keywords

    Labor productivity; Allocative efficiency; Recession; Job creation and destruction; Firm size and age;
    All these keywords.

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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